(Updated 2013 post-election)
The Patient Protection and Affordable Care Act (PPACA, ObamaCare) has been ruled constitutional. And Obama has been re-elected so there is no chance of repeal. What does all this mean for Health Savings Accounts?

HSA qualified High Deductible Health Plans (HDHP) are the fastest growing segment in health insurance today. Over 15 million people have over $17 billion saved in their HSAs. Since unspent HSA funds roll over from year to year, HSA owners have a vested interest in not spending their own healthcare dollars. The more common co-pay plans insulate people from costs which often results in over-utilization. HSAs change this behavior. This is why they are commonly referred as ‘Consumer Driven Healthcare’ plans.

There are some portions of the law that directly affect HSAs. There are several other rules that we have to speculate how they will be implemented. Let’s begin with the direct HSA rulings:

1. The penalty for ineligible withdrawals from an HSA has been increased from 10% to 20%
2. All over-the-counter medications now require a written prescription

That’s it. As long as you keep proper records verifying your HSA withdrawals were for eligible medical expenses (see publication 502) and obtain a written prescription for your allergy medication, pain relievers, etc. then you will not be subject to any penalty at all.

Now for the provisions that will impact HSAs indirectly:

1. INDIVIDUAL MANDATE (2014)
Since ObamaCare requires people to purchase health insurance, most people who are currently uninsured will look for the lowest cost option available. HSA qualified insurance policies are not allowed to have co-pays and have minimum deductibles of $1250 for self-only coverage and $2500 for families which makes them more affordable. This could dramatically increase how many HSA qualified plans are purchased.

2. STATE EXCHANGES (2014)
Exchanges are online portals where people can enroll in health insurance plans and potentially receive government subsidies based on income (up to 400% poverty level). Since HHS Secretary Kathleen Sebelius continues to interpret how these exchanges are to be implemented, this one is far from finalized. Companies will be allowed to offer up to 4 plans on the exchanges (bronze, silver, gold, platinum) each with mandated “Essential Health Benefits”. All exchange qualified small group plans have a maximum deductible of $2,000 for self-only coverage and $4,000 for families. This type of a restriction will increase the cost of HSA qualified health insurance plans over the larger deductibles available today (up to $6,050 for self-only coverage and up to $12,100 for families). But they should still offer a substantial premium savings over co-pay plans.

3. MEDICAL LOSS RATIO (2011)
ObamaCare requires Health insurance companies to pay at least 80% of all collected individual / small group premiums and at least 85% of all large group premiums out in benefits and claims. HSA qualified insurance plans typically cost less while still having similar fixed costs (insurance company marketing, underwriting, and claims processing) which makes MLR a difficult provision for them to comply with. This could limit the number of insurance companies that offer HSA qualified plans on the exchanges. However the elimination of underwriting costs (all plans will be guaranteed issue) and the reduction in marketing costs for the insurance companies once most insurance agents are replaced by exchanges should make all plans MLR friendly by 2014.

As most of you know I have been a frequent guest on other talk radio shows for over 3 years now. We (finally) decided it was time to take on a full hour every Saturday morning.Dave Ramsey tells everybody to get an HSA three hours a day five days a week, but people still don’t understand them. As the Endorsed Local Provider (ELP) here in Kansas City for Dave Ramsey listeners we feel education is the key. If people fully understood just how much premium can be saved with an HSA qualified High Deductible Health Plan (HDHP) along with the triple tax advantages only available with an HSA then everybody would want one!

One hour every Saturday morning is a good start…

Be sure to tune in to the live show between 7 and 8 central time Saturday mornings here in Kansas City on KCMO Talk Radio 710 or on the internet at www.710KCMO.com. Feel free to call in to the radio show at 913-576-7710 with specific questions about HSAs, HRAs, FSAs, individual or group health insurance.

Click here to access our podcast page where you can listen to or download our most recent shows.

Here are the podcasts of some of our shows along with a listing of the Business of the Week (BOTW)

Of course you can call our office at any time (913-432-2732 ext. 1) or visit our website www.missionHSA.com if you want to see just how an HSA qualified health insurance plan would work for you or your business. We look forward to hearing from you!

Hello! My name is Scott Borden I am a self-employed independent health insurance agent. I purchase health insurance for my family of 5. If I worked for a big company they would be paying for a portion of my health insurance. There are advantages and disadvantages to being self-employed. No help for health insurance is a big disadvantage.

Is there a smart way to purchase health insurance without breaking the bank?

There are millions of self-employed Americans out there facing the same situation. Over the past 10 years since I first found Medical Savings Accounts (MSAs), I have worked with hundreds of health insurance agents trying to get them to recommend the lower cost Health Savings Account (HSA) qualified plans to self-employed people and businesses. Still today very few health insurance agents agree with me. The most common complaint I hear from agents is that HSAs are too confusing and too complicated. People just don’t understand them. They are too risky. You name it, I’ve heard it all.

Are HSAs really difficult to understand?

I’ll let you decide…

Which health insurance plan should I choose for my family of 5 living in Kansas?

Plan 2: Humana Autograph Total + Rx HSAMonthly premium $365
$5,000 family calendar year deductible
Maximum out-of-pocket $5,000 per family
Take premium savings ($360/month) and deposit into HSA
Use HSA to pay smaller bills
If I don’t spend my HSA ($4,320 in the first year), I KEEP IT!

Which is more confusing? That wasn’t very difficult to understand, now was it. Plan 2 simply requires a deductible be satisfied then covers all remaining expenses including inpatient, outpatient, physician visits, and prescription drugs for my entire family at 100% for the rest of the calendar year.

Which would be the best to own in a healthy year?

The lower premium plan always saves money in a healthy year.

Which would be the best to own should I come down with a major disease?

In order to decide which plan “would be the best” we have to calculate which plan would cover the disease at the lowest out-of-pocket expense. Does my monthly premium play a role in this calculation? ABSOLUTELY!

With Plan1 we have to know how many physician visits, how many prescription drugs, how many outpatient treatments, how many emergency room visits, was surgery involved, etc. The policy claims “$2,500 maximum out-of-pocket per person” but unfortunately that didn’t include the co-pays. It is possible in this type of a situation to have literally thousands of dollars worth of co-pays above and beyond the “$2,500 maximum out-of-pocket”

Once again – requires a little study and math, but not very difficult.

I own the Humana plan now with a $7,000 family deductible that costs me just over $300 per month. Once money starts accumulating in the HSA then feel free to go to a higher deductible which saves even more money. This grows my HSA even faster!

Unfortunately most health insurance agents don’t want to take the time to educate the public on a lower cost way of managing health care expenses. The lower monthly insurance premiums results in lower commissions. Why should they work harder to make less? As long as 95% of the public is willing to keep paying rediculous health insurance premiums they will keep on selling them.

If I hear one more health insurance agent saying HSAs are too complicated for people to understand I am going to… I feel much better now!

Here is a list of 5 common mistakes people make when choosing whether to renew their existing health insurance plan (accepting the enormous premium increase) or find a new plan.

Gotcha #5 – “My local hospital was in the network when I first enrolled so I’m sure it’s still on the PPO list”

Don’t bother going back and digging up your PPO (Preferred Provider Organization) directory. That list was actually outdated the day it was printed! Being out-of-network is similar to handing the hospital administrator your checkbook and allowing him to bill you whatever he wants. We have seen 80% or more of the original charges be discounted because the facility was in the PPO network. There are constant fluctuations with physicians and hospitals moving in and out of PPO networks. Today the only way to get real-time PPO participation is to look up the network online. Most insurance cards will show the provider network name or website. When I travel out of town, I print a PPO network for the city I am traveling just to be safe.

Gotcha #4 – “I’ve had the same insurance company for my auto, home, and life. They have always paid well so their health insurance should be fine also.”

We all know the jack-of-all-trades story line. Just because their auto insurance paid for your fender bender doesn’t mean their health insurance will cover a $940 per week prescription drug to fight cancer. You should search for an independent health insurance agent that represents many different insurance companies and is familiar with the pre-existing condition limitations and underwriting criteria. It is difficult for an insurance agent that offers many different lines of insurance to remain up-to-date with the changing health insurance landscape.

Gotcha #3 – “A guy I work with recommended this company. He’s had them for years.”

Ask your friend if he has had any claims, and if so, how big were they. There are many inferior health insurance plans being renewed year after year simply because the insured has never had any real large claim experience. If they are limited benefit plans they have internal limitations that can have severe consequences. Some common health insurance policy limitations are annual maximums for prescription drugs or outpatient treatment (some “saver” plans exclude these altogether!) and daily maximums for chemotherapy, hospital room charges & intensive care. I recommend comprehensive major medical plans that include inpatient, outpatient, physician visits, and outpatient prescription drug coverage. These should all count together towards a large lifetime maximum of at least $2 million (I personally own a $5 million plan).

Gotcha #2 – “My employer group plan has got to be better and less expensive than an individual health insurance policy.”

Not so fast! That depends on how much your employer contributes. Since group health insurance plans require the employer to pay at least half of the employee’s health insurance cost, it is very rare for an employee to be able to purchase an individual plan on their own for less. The additional family members are a different story. Most employers pay little or none of the additional family monthly premium. We often see healthy families paying $500 to $900 per month to get a spouse and/or children covered on the group plan. With HSA qualified plans (Wow! This is the first time I mentioned Health Savings Accounts this whole post!), we can sometimes cut this cost in half leaving the other half to deposit in the HSA. This premium savings can be enough to fully fund the family out-of-pocket maximum within 12 to 24 months!

Gotcha #1 – “The plan with the lowest deductible and lowest co-pays is the best plan!”

If your family had to choose between 2 plans from the same insurance company using the same PPO network, the first plan has a $0 deductible 80/20 co-insurance plan with co-pays for physician visits and prescription drugs at monthly cost of $900, the second plan is an HSA qualified plan with a family calendar year deductible of $5000 and 100% co-insurance that includes all physician visits, prescription drugs, inpatient and outpatient hospital charges at a monthly cost of $450 per month, which would you choose?

Let’s do the math: $900 – $450 = $450 per month premium savings x 12 months = $5400 in premium savings to offset a true “out-of-pocket maximum” of $5000 for the HSA qualified plan. Tough decision here… With the $900 per month plan, you still have to come up with additional money out of your pocket to pay the co-pays and co-insurance. With the HSA plan, you would have the entire deductible available in your HSA within the first year. You should still allocate $900 per month for your health care, but give $450 per month to the insurance company and put the other $450 into yourHSA account. You get a tax deduction for every dollar you deposit. It pays you interest tax free. Withdrawals can be made at any time tax free for eligible medical expenses. There is no other savings vehicle that is tax free at both ends.

The beauty of an HSA is that if you don’t spend your HSA dollars, YOU KEEP IT! Unspent balances roll over year to year (not like an FSA or section 125 which are use-it-or-lose-it).

What Is An HSA?

A Health Savings Account (HSA) is a tax-deductible account to which you can contribute to save for future medical expenses or to pay for any day-to-day, qualified medical expenses permitted under federal tax law...[More]

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